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JOANN (JOAN) Loss Widens in Q2, E-Commerce Sales Increase Y/Y
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JOANN Inc. came up with second-quarter fiscal 2024 results, wherein the top line beat the Zacks Consensus Estimate but declined year over year. This specialty retailer of sewing and fabrics, and arts and crafts category products reported a wider-than-expected loss.
However, the company’s "Focus, Simplify, and Grow" initiative has yielded operational excellence, surpassing the targeted $200 million in annual cost reductions. These efforts have not only improved the free cash flow significantly year over year but are also projected to enhance the EBITDA performance in fiscal 2025. The company remains cautious yet optimistic, aligning its strategic priorities with the updated fiscal 2024 outlook for continued growth.
The free cash flow improved to an outflow of $111.7 million in the quarter under discussion from an outflow of $216.8 million in the year-ago period.
JOANN posted an adjusted loss of $1.44 per share in the second quarter, wider than the Zacks Consensus Estimate of loss of $1.16. The quarterly loss has increased from the adjusted loss of 75 cents reported in the year-ago period.
Net sales were $453.8 million, down 2.1% year over year. However, the top line beat the Zacks Consensus Estimate of $434 million.
Comparable sales decreased 2% year over year, showing an impressive improvement from a decline of 4% registered in the preceding quarter. Conversely, e-commerce sales demonstrated growth of 3% from the year-ago quarter, contributing to 12.1% of revenues in the second quarter, which signifies an increase of 60 basis points (bps) in the penetration rate.
The adjusted gross profit amounted to $232.3 million, down from the $242 million reported in the year-ago quarter. The adjusted gross margin contracted 100 bps to 51.2% from the prior-year period.
Selling and administrative expenses rose 4.4% to $269.9 million. As a percentage of net revenues, selling and administrative expenses increased 370 bps to 59.5% in the second quarter of fiscal 2024.
Image Source: Zacks Investment Research
Other Financial Details
JOANN ended the quarter with cash and cash equivalents of $19.1 million, long-term debt of $1.09 billion, and shareholders’ deficit of $162.2 million.
Guidance
For fiscal 2024, JOANN anticipates a 1-3% decline in net revenues. The company guided adjusted EBITDA between $85 million and $95 million.
Management anticipates a capital expenditure (net of Landlord Contributions) of $35-$40 million. Also, the company expects a year-over-year free cash flow improvement between $150 million and $170 million in fiscal 2024.
Shares of this Zacks Rank #3 (Hold) company have lost 25.6% in the past three months compared with the industry's decline of 0.8%.
3 Red-Hot Stocks to Consider
Here we have highlighted three better-ranked stocks, namely Urban Outfitters, Inc. (URBN - Free Report) , Ulta Beauty Inc. (ULTA - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, flaunts a Zacks Rank #1 (Strong Buy) at present. The company’s expected EPS growth rate for three to five years is 23.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings suggests growth of 6.6% and 81.7% from the year-ago period’s reported figure. URBN has a trailing four-quarter earnings surprise of 19.2%, on average.
Ulta Beauty, which is a leading beauty retailer in the United States, currently has a Zacks Rank #2 (Buy). ULTA’s expected EPS growth rate for three to five years is 8.8%.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings suggests growth of 9.5% and 5.4%, respectively, from the year-ago reported numbers. ULTA has a trailing four-quarter earnings surprise of 12.9%, on average.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank #2. AEO’s expected EPS growth rate for three to five years is 9.6%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings suggests growth of 8.3% from the year-ago reported number. AEO has a trailing four-quarter earnings surprise of 9.2%, on average.
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JOANN (JOAN) Loss Widens in Q2, E-Commerce Sales Increase Y/Y
JOANN Inc. came up with second-quarter fiscal 2024 results, wherein the top line beat the Zacks Consensus Estimate but declined year over year. This specialty retailer of sewing and fabrics, and arts and crafts category products reported a wider-than-expected loss.
However, the company’s "Focus, Simplify, and Grow" initiative has yielded operational excellence, surpassing the targeted $200 million in annual cost reductions. These efforts have not only improved the free cash flow significantly year over year but are also projected to enhance the EBITDA performance in fiscal 2025. The company remains cautious yet optimistic, aligning its strategic priorities with the updated fiscal 2024 outlook for continued growth.
The free cash flow improved to an outflow of $111.7 million in the quarter under discussion from an outflow of $216.8 million in the year-ago period.
JOANN Inc. Price, Consensus and EPS Surprise
JOANN Inc. price-consensus-eps-surprise-chart | JOANN Inc. Quote
Let’s Delve Deeper
JOANN posted an adjusted loss of $1.44 per share in the second quarter, wider than the Zacks Consensus Estimate of loss of $1.16. The quarterly loss has increased from the adjusted loss of 75 cents reported in the year-ago period.
Net sales were $453.8 million, down 2.1% year over year. However, the top line beat the Zacks Consensus Estimate of $434 million.
Comparable sales decreased 2% year over year, showing an impressive improvement from a decline of 4% registered in the preceding quarter. Conversely, e-commerce sales demonstrated growth of 3% from the year-ago quarter, contributing to 12.1% of revenues in the second quarter, which signifies an increase of 60 basis points (bps) in the penetration rate.
The adjusted gross profit amounted to $232.3 million, down from the $242 million reported in the year-ago quarter. The adjusted gross margin contracted 100 bps to 51.2% from the prior-year period.
Selling and administrative expenses rose 4.4% to $269.9 million. As a percentage of net revenues, selling and administrative expenses increased 370 bps to 59.5% in the second quarter of fiscal 2024.
Image Source: Zacks Investment Research
Other Financial Details
JOANN ended the quarter with cash and cash equivalents of $19.1 million, long-term debt of $1.09 billion, and shareholders’ deficit of $162.2 million.
Guidance
For fiscal 2024, JOANN anticipates a 1-3% decline in net revenues. The company guided adjusted EBITDA between $85 million and $95 million.
Management anticipates a capital expenditure (net of Landlord Contributions) of $35-$40 million. Also, the company expects a year-over-year free cash flow improvement between $150 million and $170 million in fiscal 2024.
Shares of this Zacks Rank #3 (Hold) company have lost 25.6% in the past three months compared with the industry's decline of 0.8%.
3 Red-Hot Stocks to Consider
Here we have highlighted three better-ranked stocks, namely Urban Outfitters, Inc. (URBN - Free Report) , Ulta Beauty Inc. (ULTA - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, flaunts a Zacks Rank #1 (Strong Buy) at present. The company’s expected EPS growth rate for three to five years is 23.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings suggests growth of 6.6% and 81.7% from the year-ago period’s reported figure. URBN has a trailing four-quarter earnings surprise of 19.2%, on average.
Ulta Beauty, which is a leading beauty retailer in the United States, currently has a Zacks Rank #2 (Buy). ULTA’s expected EPS growth rate for three to five years is 8.8%.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings suggests growth of 9.5% and 5.4%, respectively, from the year-ago reported numbers. ULTA has a trailing four-quarter earnings surprise of 12.9%, on average.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank #2. AEO’s expected EPS growth rate for three to five years is 9.6%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings suggests growth of 8.3% from the year-ago reported number. AEO has a trailing four-quarter earnings surprise of 9.2%, on average.